BRRRR or Conventional in Orange County

[Sam Mahmood]

Hey Guys, 

Im located in huntington beach, and opened up escrow on a great triplex that I will occupy. My biggest hurdle is figuring out if I should do a construction loan on it or conventional non qm with today's rates at 7.7%. 

The property is 1.65M half a mile from a beach, I will airbnb one of the units, long term rent one, and live in the other. I think the ARV is 2.1M after 190k of rehab.

my options are Bridge loan at 75% LTV 2.5 points, cash to close is 325K, 9.9% interest only, and payments are 11K a month no pre pay penalty when i refinance.

Or conventional non qm for 15% down 275K cash to close lock a rate about 7.7% and cash to close is 275k and I would have to fund the rehab myself. 

[Jeff Copeland]

A very important consideration right now is the term. 

How long do you lock/fix 7.7 on the non-QM product? That sounds high, but even conventional QM loans right now are in the mid to high 6's in some cases. 

Unfortunately, 7.7% may sound great a couple of years from now!

The bridge is presumably only for a year or two. My concern there would be having to refi out of that balloon in a year or two at 8 or 9% +.

If you can afford it, you may want to lock in the longest fixed term you can.